Nepal agrees to settle 40-year-old Russian debt

KATHMANDU:

Nepal has agreed to repay outstanding debt of $1.16 million (approximately Rs 115.36 million) that it obtained from the then Soviet Union government almost four decades ago.

An agreement to this effect was signed by the officials of the two countries in Russia on Tuesday, says a statement posted on the website of the Russian Ministry of Finance.

Madhu Kumar Marasini, chief of the International Economic Cooperation Coordination Division at the Ministry of Finance, signed the pact on behalf of the Nepal government. It is not known who signed the agreement on Russian government’s behalf.“The agreement was signed in accordance with the order of the government of the Russian Federation on April 4, 2014,” says the website. The debt has to be repaid within three months of sealing the deal.Nepal is said to have obtained three million roubles in soft loan on April 13, 1978, from the Soviet Union to establish Nepal Rosin and Turpentine Company. Surprisingly, Nepal was not aware of the loan amount for years as it could find no document on it — an indication of the then government’s negligent bookkeeping practice, which later prompted the authorities to float the idea of

establishing Debt Management Office to keep proper records of foreign grants and loans.

Then in July 2004, Russia, which was formed after disintegration of the Soviet Union in 1991, brought the issue to the notice of the Nepal government. After that Russia raised the matter at various formal meetings with Nepal. But nothing transpired.Then in 2012, Nepal asked Russia to provide evidences, like document on the loan agreement, to substantiate its claim. Later in July of that year, a delegation led by Lal Shankar Ghimire, who headed the Foreign Aid Coordination Division at the Finance Ministry, went to Moscow and signed an agreement to settle the debt.The outstanding loan, including principal and interest, hovered around $1.7 million at that time.

The Russian government then offered to write off around 35 per cent of the debt, meaning Nepal had to pay around $1.16 million.It is said loan repayment is essential for Nepal, as it cannot be eligible for Russian foreign assistance or private sector investment unless it first clears off the debt.

Source: THT